What you need to know about paying for college

How parents can save for college

Guaranteed Education Tuition (GET)

Under this state plan, parents prepay a child's tuition. The basic idea is that you buy a year's worth of tuition now and cash it in when your child starts college. The state guarantees that a year's worth of tuition units bought now will buy a year of undergraduate tuition at the most expensive public university in Washington state when your child attends college in the future.

PROS: If tuition at the University of Washington keeps rising at its current annual rate of 7 percent, while overall inflation remains less, parents will be better off paying tuition now. GET can be used at almost any accredited U.S. college and selected colleges in other countries. After-tax money put into GET grows tax-free, as long as it's used for education.

CONS: You pay a slight premium over the current actual cost of tuition, so it generally takes two or three years for the investment to pay off. Currently, units cost $76 but are worth $67.20. Also, if you decide to use your investment for something other than college, in most cases you lose the tax benefits and incur penalties.

For more information, go to: www.get.wa.gov

Self-directed 529 college-savings plans

These are similar to 401(k) plans, except they are for education rather than retirement. You can direct deposit a certain amount each month — whether $50 or $500 — and your after-tax money grows tax free, as long as it's used for education. Although Washington doesn't sponsor one of these plans, residents can participate in a plan sponsored by another state.

PROS: The accounts are professionally managed. Investments are aggressive when the child is younger and more conservative when the child nears college age.

CONS: Because the plans are managed by individual states, each has a different set of rules and fees, which can be confusing. It pays to shop around. You generally lose the tax benefits and incur fees if you use the money for anything other than education.

For more information, go to: www.finaid.org

Coverdell Education

Savings Account

Previously known as Education IRAs, these plans allow parents to deposit money into an account in the student's name. The after-tax money then grows tax free.

PROS: More flexibility in investment than allowed in 529 plans. Money can be used for elementary and secondary school, as well as for higher education.

CONS: A big drawback is that the maximum investment is $2,000 per year, less than the amount many parents will need or want to save. Plans must be used by the time a child reaches age 30. Plans are not available to couples who earn more than $220,000 per year or single taxpayers who earn more than $110,000.

For more information, go to:

www.irs.gov/pub/irs-pdf/p970.pdf">www.irs.gov/pub/irs-pdf/p970.pdf

Sources: www.finaid.org; www.irs.gov; www.get.wa.gov; Seattle Times archives;

Seattle Times interviews.

Scholarships

Scholarships — and fellowships for graduate students — can substantially reduce the cost of college. Tens of thousands of scholarships are available nationwide, from sports to academics and much more.

Parents need to start thinking about scholarship options early. For instance, the Washington College Bound Scholarship — which covers the cost of tuition, fees and books — is available to low-income students who sign a pledge in the seventh or eighth grade promising to graduate from high school and to demonstrate good citizenship.

There are many quirky and little-known opportunities out there. Take, for instance, "The Car of MY Future" scholarship. The Washington State Auto Dealers Association each year offers five scholarships worth a total $10,000 for students who write the best two-page essay, with artwork, on what their personal car of the future might look like.

It pays to check scholarship opportunities with high-school and college counselors, local community organizations, and through free online searches. Avoid companies that want you to pay for a scholarship search.

Some good free online sites include: www.collegeplan.org; www.fastweb.com; www.collegeboard.com.